Optimise Inventory Control with an Effective Bill of Materials

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A Bill of Materials (BoM) is a comprehensive, hierarchical list of the quantities of components, ingredients or materials needed to make a finished product. It is the blueprint for the product and essential to all aspects of its life cycle.

A BoM can range from small assemblies to complete machinery, possibly consisting of many smaller BoMs that incorporate each part within individual components, detailing everything down to elements such as packaging, labels and fastenings needed in the assembly process.

They can be used as a picklist of all items issued for production or assembly and documented correctly, the BoM is a useful tool for costing finished products.

Why do businesses need a Bill of Materials?

In manufacturing, the BoM will help drive the procurement and logistics for product creation. It tells you everything that is required to build each component of a finished product and provides a valuable tool to help improve inventory control.

A detailed BoM helps the manufacturing team understand design assembly, processes and procedures. Without a BoM, products are at risk of being built incorrectly or inefficiently. There is also a risk that some manufacturing and assembly costs aren’t correctly apportioned to the product. The BoM allocates costs to every item of the product, from nuts and bolts to final packaging.

BoMs save both time and money. A complete knowledge of every component and step in the manufacturing process allows the operations team to make appropriate trade-offs between time, cash flow and inventory control throughout the life of a product.

A BoM is also important for eliminating problems in lean manufacturing in breweries, coffee roasters, and other industries. Inventory control is crucial to lean operations because ordering the wrong part or incorrect quantities can lead to downtime, lost productivity and the inability to complete product runs. These errors have the potential to cause lost sales through incomplete or unfilled orders and can have a significant financial implication for your business.

Companies that outsource manufacturing activities need to create an accurate and efficient BoM. It is essential that the BoM for contract suppliers is complete, accurate and reviewed at regular intervals to avoid production delays.

Why is a BoM important for inventory control?

The importance of a BoM to inventory control is that it provides a complete and accurate picture of what is required, all the materials needed for planned work and the processes associated with creating a single product.

A BoM provides a description of the individual components and the relationship between each separate part used in production. All components required to manufacture a complete shippable item are listed by part number, description and quantity.

An effective BoM should also include detail of the tools and equipment required for assembly, sub-assembly and any consumables needed in the manufacture of the final shippable product.

Having an all-inclusive measure of total assembly optimises inventory control, enables better decision-making, highlights areas for improved efficiency, cost-effectiveness and enhanced quality.

Creating an effective Bill of Materials

An effective BoM must be developed early in the product lifecycle to capture everything and anything that is required for the finished product and must also be created with a view of all examining parties in mind.

Include all proper functions, categories and anything that describes the product from beginning to end. Necessary categories include multi-level parent and child parts, part numbers and description, and quantities per completed product.

Supporting categories should include lead times, design accessibility, production and inventory control, supply and supplier alternatives that also contain systems for addressing product change notices as they arise.

Automation is a critical factor to ensure the efficiency and success of BoM management because it provides organisations with real-time traceability of all the material parts and products. Information obtained through your BoM can fed directly into any management software system to further enhance operational efficiencies.

More about the author:

Melanie - Unleashed Software
Melanie

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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